Swiggy IPO set to cook up a storm for early backers, deliver up to 35x returns

Bengaluru: Swiggy Ltd’s early backers, including Accel, Apoletto, Elevation Capital and Norwest Venture Partners, are set to reap multifold gains on their investments as the food delivery and quick-commerce platform goes public in early November, according to a Mint analysis.

The price band for Swiggy has been fixed in the range of ₹371-390 per equity share with a face value of ₹1, according to a Bloomberg report. The company has sought a valuation of $11.3 billion (nearly ₹95,000 crore) at the upper end of the band, making it one of the largest maiden offers of the year. This is a slight markup from the $10.7 billion valuation when it raised $700 million in its last private round led by US asset manager Invesco in January 2022.

The ₹11,300-crore offer, expected to open on 6 November, includes about ₹4,499 crore in fresh capital issue alongside a secondary sale of 175.1 million equity shares through an offer for sale (OFS) by some of the investors offloading part of their stake. Those who invested early are expected to reap windfall gains.

About 35X returns

For instance, Accel, which has an average acquisition price of ₹11.17 per share, will make close to 35x returns on its initial investment. Apoletto Asia (acquisition price of ₹13.98), Elevation Capital ( ₹11.44) and Norwest Venture Partners ( ₹14.82) will earn returns in the range of 26-34x returns, according to Mint’s calculations. Others including Tencent ( ₹165.47), Alpha Wave ( ₹178.9), Coatue ( ₹101.49) and DST Asia ( ₹94.75) will also sell in the OFS.

Prosus, the largest shareholder with a 30.9% stake and an acquisition price of ₹131.5 apiece, has lowered the number of shares it is offering to sell, according to the red herring prospectus. Meituan, which invested through its subsidiary Inspired Elite Investments Ltd, has sold over $200 million worth of its stake in Swiggy to a US-based investor in a secondary deal, according to an Entrackr report published last week. It is also offloading about 6.74 million equity shares under the OFS.

While some of these investors have been a part of the cap-table for more than a decade, other long-term investors like Softbank will continue to stay invested in the hope of reaping gains as volumes and market share improve post-listing.

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Swiggy’s founders Sriharsha Majety, Rahul Jaimini and Nandan Reddy are also part-selling stakes in the IPO. Over the last few months, Swiggy’s IPO has also attracted interest from Bollywood celebrities including Amitabh Bachchan, Madhuri Dixit’s family office, and Sidharth Malhotra, as well as sportspersons such as Rahul Dravid and Zaheer Khan.

“Swiggy’s upcoming IPO, alongside Zomato’s strong market performance, sets a precedent for other startups, especially e-commerce/q-commerce companies, looking to go public in India,” said Sanjay Israni, partner at Desai & Diwnaji. He said the IPO highlights the growing investor appetite for tech-driven businesses, particularly in sectors like food delivery and quick commerce. “The interest from high-profile investors and celebrities also signals that such IPOs can attract significant attention, potentially paving the way for other startups to follow suit.”

Dark store expansion plans 

The food-tech startup plans to use the bulk of the proceeds (about ₹1,178.7 crore) towards expanding its dark store network through its subsidiary Scootsy Logistics Pvt Ltd. This investment will support the growth of Swiggy Instamart, its quick commerce arm, which has become a critical focus area for the Softbank-backed company as it scales rapidly to meet industry demands. As of 30 June, Swiggy operated 581 dark stores, ranging in size from 1,400 sq ft to 10,000 sq ft, with an average delivery time of 12.6 minutes across cities.

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Additionally, the company will also use about ₹1,115.3 crore towards branding and promotional activities aimed at enhancing performance marketing and digital media efforts. In FY24, Swiggy spent ₹558 crore on marketing, a slight dip from the previous year. It intends to spend another ₹703.4 crore for technology upgrades, cloud infrastructure, and general corporate purposes. The company also outlined plans to spend part of the proceeds to fund acquisitions but did not disclose any figures for it.

Losses narrowed

Bengaluru-based Swiggy narrowed its net loss to ₹2,350 crore from ₹4,179.3 crore in the previous year, largely due to robust growth in its food delivery and quick commerce businesses. Over the last 18 months, the startup has been focused on streamlining operations and improving margins. Its revenues jumped 36% to ₹11,247 crore in the same period.

Meanwhile, its bigger rival Zomato’s revenues jumped 67% to ₹12,961 crore in FY24. It turned in a profit of ₹351 crore compared with a loss of ₹971 crore in FY23. The Gurugram-based startup has seen its share price nearly double to ₹252 apiece as of Tuesday’s close since its listing in July 2021.

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With a market cap of about $28 billion, Zomato has established itself as a leader in the category with diverse income streams from food delivery, quick commerce via Blinkit, and acquisitions like Paytm’s ticketing business, Israni said. While Swiggy is well-positioned to carve out a niche in the market, “the ongoing rivalry between the two companies will be crucial to watch as they navigate the evolving food delivery and quick commerce landscape in India,” he said.